This is part two of a series focusing on why India faced gas and oil shortages almost immediately as the US-Israel war on Iran began, leading to the closure of the Strait of Hormuz. Read part one here. By 2020, India’s energy targets had stopped making sense. Going by the National Democratic Alliance’s projections, India’s oil demand would double by 2030. In the same period, coal production would more than double and gas demand would almost treble. That was just the start. It also projected a five-fold rise in India’s renewable energy capacity by 2030; a 55% jump in hydel-power generation by 2030; and said all three-wheelers would go electric by 2023; all two-wheelers by 2025, and a third of all cars by 2030.Thereafter, it also promised to treble India’s nuclear power capacity by 2032.These targets left sectoral experts scratching their heads. Could India double its oil consumption while converting all two-wheelers, all three-wheelers, and a third of all four-wheelers to electric – not to mention road transport minister Nitin Gadkari’s ethanol push? How fast would India’s economy (already hit by demonetisation and the Goods and Services Tax) have to grow to absorb all this energy? Such contradictions were new. Under the United Progressive Alliance, documents like the Integrated Energy Policy set out the balance India needed to strike across fossil fuels, nuclear and renewables to meet diverse developmental objectives (high economic growth/low carbon emissions/energy independence). Under the National Democratic Alliance, however, that changed. “There is no comprehensive thinking in this government,” a former finance secretary had told me in 2020.“No one thinks 20 years ahead. Every ministry is pretty much working on its own.”For anyone trying to understand India’s response to the energy crisis, this incoherence is a good starting point. It has saddled India with two major consequences. One, with the Modi government simultaneously backing fossil fuels and renewables, price – not policy – came to shape India’s energy transition. With that, as the third and fourth parts of this series will show, the country’s decarbonisation slowed.Two, these bullish projections for oil, gas and coal demand turned India into the last big market for global fossil fuel majors. As they lobbied for market access, India got locked into imported fuels it didn’t even need.Natural gas illustrates the second point to perfection.An inordinate fondness for natural gas Until 2014, natural gas was a small part of India’s energy mix. One reason was scarcity. Between low domestic reserves and the imperative for self-reliance in fertilisers, India had granted the first right over domestic gas to fertiliser factories which needed gas for making urea. Only leftover gas went to other users like gas-based power projects and CGD (City Gas Distributors) networks.Another reason was price. As a 2019 report by the Parliament’s Standing Committee on Energy said, to be competitive against coal-based power plants, gas-based power projects needed gas at no more than $5.5-6.0/MMBTU (metric million British thermal unit). Domestic gas cost between $4-$5.5/MMBTU but mostly went to fertiliser plants. Costing between $10-12/MMBTU, imported gas was too expensive.This situation seemed unchanging. Domestic gas production was slowing. Dashing policymakers’ hopes, gas supplies from Reliance’s KGD6 basin had not materialised. Gas from India’s newer deepwater fields, like the East Coast Block, was expected to cost between $8/MMBTU-$9/MMBTU. On the whole, even as fossil fuel majors spun natural gas as a bridge fuel between oil and renewables, it seemed destined for a relatively small role in India’s energy mix.Then came the Modi government’s decision to almost treble the share of natural gas in India’s energy mix – from 6.3% to 15%. “Growth in gas demand between 2012-2019 was -0.8%,” a Delhi-based energy researcher had told me in 2020. Now, to meet the government’s goal, gas consumption would have to grow at over 11% annually.Its decision, however, went unscrutinised. With that, accompanying questions – what India would have to pay and why the Modi government was so keen on imported gas – went unexplored.This was a mistake as the government’s experience with Tellurian shows, both expenditure and keenness were massive. The Modi government’s big push for TellurianIn February, 2019, a sales pitch landed at India’s Ministry for Petroleum and Natural Gas (MoPNG). An American shale gas exporter, Tellurian, had offered a stake in its upcoming LNG export terminal to Petronet LNG. Invest $2.5 billion in us and underwrite $5 billion of our debt, Petronet was told, and you will get an 18% stake in our upcoming terminal and an annual supply of five million tonnes of gas at a landed price of $6/MMBTU for the next 40 years.It was a weak offer. Given the shorter distance between India and Qatar, not only was natural gas from Qatar cheaper, the LNG export terminal market itself was getting over-crowded, with dozens coming up in the US alone. A glut was taking shape, driven largely by countries trying to liquidate their hydrocarbon reserves while they could. It made little sense for India to invest in one LNG terminal instead of getting them to compete with each other.There was also past history to keep in mind. In 2011 and 2013, GAIL had signed two purchase contracts with US shale gas exporters — Cheniere Energy (2011, 3.5 million tonnes per annum) and Dominion Energy (2013, 2.3 million tonnes). By 2017, as then-Indian oil minister Dharmendra Pradhan told the Indian parliament, struggling to sell this gas to price-sensitive customers in India, GAIL was trying to renegotiate both contracts.Given this backdrop, in May 2019, Petronet’s board turned Tellurian down. “Locking imports for 40 years together with an equity investment in the liquefied natural gas terminal was not favoured,” reported NDTV Profit, adding Petronet’s promoters, including GAIL, Indian Oil Corporation and Oil and Natural Gas Corporation were all against the deal.The government, however, wanted it. What India saw next was a tussle between the Modi government’s will and Petronet’s won’t. In September 2019, just before Modi’s visit to Houston, an MoU was finalised between Tellurian and Petronet. This was the visit in which Modi attended the “Howdy Modi” event which counted Tellurian amongst its sponsors. Talks resumed between the two firms. Indian bourses were unenthused. Petronet shares fell.When the two firms failed to reach a final agreement by March 2020 as projected, the MoU was extended till May 31 that year. It lapsed yet again. Renewed again in July, just before a virtual meeting between Pradhan and U.S. Energy Secretary Dan Brouillette, it lapsed a third time. In 2021, Tellurian’s pitch — that it would supply LNG at cost — was also blunted by charges that it had overpaid for assets. “Tellurian’s… Phase 1 cost is $12 billion for 11 MTPA output, or $1,090 per tonne of installed capacity,” said an IEEFA report which contrasted Tellurian’s numbers with those of Cheniere. “Cheniere’s train six expansion now in construction has an announced cost of $2.5 billion for 4.7 MTPA of added capacity, or a cost of $535 per tonne.”In December that year, Petronet again rejected the deal. Its director (finance), Vinod Kumar Mishra, told reporters: “Right now, a lot of cheaper LNG is available with us, without any investment, so why should we at all go for an investment.” It would be proven prescient. In September 2022, Shell and Vitol scrapped their deals with Tellurian, deepening its need for investors. In this period, the Modi government continued to back Tellurian. In October 2022, minister Hardeep Puri met Tellurian president and CEO Octavio Simoes. “We exchanged notes on the evolving gas markets & opportunities for Indian Oil Marketing Companies to invest in Tellurian’s projects in the US,” he tweeted thereafter.The government’s enthusiasm for Tellurian, at a time when industry giants were turning unsure about its viability, has never been explained. With Tellurian also funding Donald Trump’s Republicans, an executive working with the Indo-American Chamber of Commerce had told me, the US administration under Trump had pushed the deal hard. In this scenario, though, India would have pushed benefits to a firm funding Trump’s campaign.There were other possibilities. A senior bureaucrat familiar with the government’s energy policy linked the deal to the Modi government’s instrumental use of energy purchases. “India wants diplomatic support from the USA,” he said. “We also want special materials for armoured vehicles and planes. The US had been blocking their exports. Many feel these are linked.”In either case, India was walking into a very expensive trade-off. Had the deal gone through, the country would have paid as much as $70 billion (Rs 665,000 crore) over 40 years.5 MTPA for 40 years = 200 million tonnes.One tonne of gas = 51.7 MMBTU.At $6/MMBTU = $62 billion + $7.5 billion as underwritten debt = $69.5 billion = Rs 665,000 crore over 40 years. The Wire wrote to Puri and Pradhan asking why they pushed the Tellurian deal despite these concerns. This article will be updated when they respond.Eventually, though, India dodged a bullet. Tellurian slipped into bankruptcy and, in December 2024, was sold for $1.2 billion. Well below the $7.5 billion Petronet was to pay for a 18% stake.India was less lucky elsewhere. In 2024, the Modi government signed a LNG purchase contract with Qatar which works out to $78 billion (Rs 741,000 crore) over 20 years. According to the Financial Times, non-energy considerations have shaped this deal as well. “In August 2022, Qatar arrested eight former Indian Naval officers and later sentenced them to death,” reported FT this June. “A person briefed on the matter told FT at the time the eight were spying for Israel on Qatar’s submarine programme. They were later released after a state-owned Indian company agreed to buy large volumes of Qatari liquified natural gas.”The Wire asked Puri and Pradhan to comment on the FT’s report. This article will be updated when they respond. In the meantime, a second point needs to be made. Availability isn’t reason enough for households, autos and industrial units to switch to imported natural gas. The fuel also needs to be cheaper. And so, not only did the Modi government have to invest in gas infrastructure, it also had to subsidise the fuel. What followed, ergo, is a tale where the BJP gained but India’s economy took a battering.A game of larger costsIn its dying days, the UPA had overturned the previous arrangement for domestic gas distribution. City Gas Distribution or CGD was placed first, with strategic sectors like space and atomic research, petrochemicals and – only then – the leftovers going to fertilisers. Some of its bullishness was predicated on the since-dashed hope of high natural gas production from Reliance’s KG basin fields. On coming to power, despite domestic production staying low, the Modi government doubled down, boosting India’s CGD networks from 54 (2014) to 228 (2020). In tandem, the Modi Sarkar launched the Pradhan Mantri Ujjwala Yojana (2016), which gave free LPG cylinder connections to BPL families. The CGD push was integral to Ujjwala, a former member of the Petroleum and Natural Gas Regulatory Board (PNGRB) had told me on the condition of anonymity. “Cooking gas has huge political significance,” the official had said. “The government wanted to switch urban consumers to PNG and divert LPG cylinders to rural areas.”Much has been written since about Ujjwala — and how, as precarity deepened, rural households stopped ordering fresh cylinders. This, however, is just half the story.Availability alone, as said above, wouldn’t get families off LPG and into PNG. And so, to make piped gas attractive, not only did the government direct cheap domestic gas to CGDs and make LPG costlier by cutting subsidies, it also capped PNG prices. “The average household uses 0.4 cubic metre of gas in a day,” a former manager at Unison Enviro, a subsidiary of construction major Ashoka Buildcon, had told me. “In a month, that works out to 15 cubic metres. The administered rate for natural gas by the government is Rs 28/cubic metre. That works out to Rs 420 a month — cheaper than an LPG cylinder.” Given such economics, and the government’s assurances on natural gas, families gave up LPG cylinders; businesses using diesel refitted to LNG, auto- and cab-drivers dropped petrol vehicles and EV plans and opted for CNG.These switches, however, were being underwritten by CGD firms. They were spending as much as Rs 14,000-Rs 15,000 to connect a household to the gas grid, said the former manager, but notching revenues of just Rs 420 per household a month. “The piped natural gas business is viable only if CGD networks can also sell to transport and industrial users,” he told me. Such zones with both residential and industrial users, however, were few.Handed the onus of keeping PNG affordable, CGD networks first went slow on fresh capex and then stopped bidding for fresh CGD tenders. With that, pressure grew on state oilcos to step in. By 2021, they had bagged as many as 60-70% of bids — and taken over the role of keeping PNG attractive for users. Regions continued to get bidded out. By 2025, CGD networks had covered almost all of India.Through this time, larger costs mounted elsewhere in the economy. Units deprived of domestic gas struggled. Once told to run on imported gas, gas-based power plants couldn’t compete with coal-based counterparts. Once switched to a blended mix of domestic and imported gas, costs went up at India’s fertiliser plants. With that, the government’s fertiliser subsidy rose — climbing to $30.5 billion (About Rs 244,000 crore) in FY2023. With growth constrained by low demand from gas users, LNG import terminals and pipelines saw low capacity utilisation as well.With mounting costs came a belated rethink. In 2022, saying it needed to supply more domestic gas to power plants and fertiliser units, the government first froze domestic gas allocations to CGD networks and then, two years later, cut CGD gas supplies by a fifth.With that, CGD networks sank deeper into the mire. Much of this had been predicted. As former Petroleum Secretary Vivek Rae had written back in 2020: “As cheap domestic gas sources dry up… bidders will be faced with serious problems of cost recovery, thereby affecting viability and sustainability of the CGD system.”By 2024, they were buying LNG from international spot markets. Given it was costlier, not only were they buying fewer tonnes, Indian households and businesses that switched to LNG found themselves paying more. “Once hailed as the cheaper and cleaner alternative to petrol and diesel with price differences ranging between Rs 30 and Rs 60 per unit, CNG has steadily lost its sheen,” wrote ET in 2025. “In several cities, CNG is now nearly as expensive as petrol. In others, it has outright surpassed it.”When I got a CNG car in 2015, the price was Rs 35/kg for CNG and petrol was Rs 60/L, in ten years it has shot up to Rs 80/kg for CNG and Rs96/L for petrol. The idea was to switch to clean fuel and also save money. Is this how green choices are punished? And not everyone can… https://t.co/aFGhV95sy6— Vijaita Singh (@vijaita) May 17, 2026A very expensive betThe costs run even higher. Apart from what India was paying gas suppliers (Rs 117,926 crore in FY 25-26 alone, as per data from the MoPNG’s Petroleum Planning and Analysis Cell), the country was investing in gas infrastructure like LNG import terminals and gas pipelines — a total investment of $66 billion (about Rs 488,000 crore), as Pradhan has said. Thereafter, needing to subsidise LNG, it paid out some more. Even ignoring India’s outlay on subsidy; even assuming the LNG import bill stays the same; and even assuming India won’t make further investments in LNG infrastructure, the Modi government has locked India into an expenditure of Rs 2,846,520 crore on natural gas over the next 20 years.More strikingly, it committed India to this expenditure at the very time the renewable energy revolution was underway. If it had left domestic gas for industries like fertiliser and directed these sums into renewables, India would have decarbonised faster — and scored energy independence sooner.The Modi government’s decisions, however, created an outcome where the BJP won political points and firms like Qatar Petroleum, Cheniere and Dominion made money. India, however, ended up with a fresh dependency on one more imported fuel and invested far less than it could have in renewables.One number is enough to substantiate that claim about underfunding. By any yardstick, India’s PLI scheme for photo-voltaic modules is important. As the government itself says, the scheme seeks to make India self-reliant in “high efficiency” solar panels’ development and manufacturing.Its allocation? Rs 24,000 crore (over five years). Or 0.84% of what the country will (conservatively) spend on Natural Gas over the next 20 years. More on that in the next two parts of this series.M Rajshekhar is an independent reporter who writes on energy, climate change and oligarchy. He is also the author of Despite The State: Why India Lets Its People Down and How They Cope.